The 1031 Exchange

Often, we can close your relinquished property and your replacement property simultaneously, but that's not the only way to do things. By following this timeline, your property transaction will close ahead of the 1031 Exchange timlines and put your money to work sooner, while providing you with solid investment income.

Coordinating the 1031 process is essential to the transaction, and Commercial Investment Strategies can synchronize the purchase timeline, the exchange company and the lending institution associated with your future purchase. Hundreds of properties will be reviewed on your behalf. We will invest countless hours in this process to assure you the best possible long-term investment.

  1. A Delayed Exchange is a transaction where the Exchanger receives like-kind properties after they have sold their existing property, rather than requiring a simultaneous exchange. The Delayed Exchange is subject to the timetables listed above.
  2. A Reverse Exchange is a transaction where the Exchanger buys a Replacement Property before selling his existing property. This happens when a investor finds an ideal Replacement Property that may not be available at a later date. This requires the cast to close the Replacement without the funds from the Relinquished sale, which is why it's not as common.
1. The Exchanger has 45  days (Identification Period) from the Relinquished Property's date of closing to identify up to three (3) Replacement Properties to the qualified intermediary.
    A. Then the Exchanger has 135 days to close on the Replacement Property, for a total of 180 days from the date of the first close the date of the second close.
    B. Failure to adhere to both exchange deadlines will disqualify the exchange.
    C. The Exchange must close on the Replacement Property before the earlier of the 180 day period or the due date of the Exchanger's federal income tax return. However, for tax return dates that fall before the 180 days, a tax return extension can be filled.
2. Variation#1: The 200% Rule: The Exchanger can identify more than three (3) properties if the properties combined fair market value does not exceed twice the fair market value of the Relinquished Property.
3. Variation#2: The 95% Rule: The Exchanger can identify any number of properties if 85% of the total value of the named properties is acquired within the exchange period.
  1. The Replacement Property's Value, Equity and Debt must be equal to or greater than the value of the Relinquished Property.
  2. All of the net proceeds from the sale of the Relinquished Property must be used to acquire the Replacement Property.
  1. Boot: This compromises of any funds received from the Relinquished Property sale but not utilized in the exchange for the Replacement Property that will be subject to income tax.
  2. Continuity of Title: The Exchanger must take title to the Replacement Property using the same entity that previously held the Relinquished Property.
To fully defer state and federal capital gain taxes, the Exchanger must reinvest all exchange proceeds and either acquire property with equal or greater debt or reinvest additional cash equal to the debt relief.
Your minimum down payment for your replacement property should be equal to or greater than the net proceeds from the sale of your relinquished property. Otherwise, you may have boot in the form of cash.
    Relinquished Property
    (Original Purchase Price) - (Existing Loans) - (Exchange Expenses)
    Equals Net Proceeds

    Replacement Property
    (Purchase Price) - (New Loans)
    Equals Minimum Down
  • Exchange or Accommodator fees
  • Messenger fees
  • Escrow, Processing and Statement fees
  • Finder fees
  • Tax service fees
  • Inspection and testing fees
  • Notary and Recording fees
  • Brokerage commissions
  • Title insurance premiums
  • Documentary Transfer taxes
  • Legal/Consulting fees incurred
  • Conveyance Tax*
  • Rents
  • Security Deposits
  • Utilities
  • Property Taxes
  • Property Insurance
  • Repairs and Termite work
  • Credits to Buyers for non-recurring closing costs or repairs
  • Loan Acquisition fees (such as points, mortgage insurance, application fees, lender's title insurance, assumption fees, appraisal fees, hazardous waste/property inspection required by the lender).
Your minimum down payment for your replacement property should be equal to or greater than the net proceeds from the sale of your relinquished property. Otherwise, you may have boot in the form of cash.

    Relinquished Property
    (Original purchase Price) - (Existing Loans) - (Exchange Expenses)
    Equals Net Proceeds

    Replacement Property
    (Purchase Price) - (New Loans)
    Equals Minimum Down

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Christina’s mission is to provide exemplary, personalized service for multifamily investors. She is laser-focused on providing the best marketing and exposure, identifying capable buyers, and proactively addressing their concerns so that the process is as stress-fee as possible. Commercial Investment Strategies is the only firm in Hawaii exclusively engaged in apartment building buying and selling.

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Christina Dwight


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